Freelancers foresaw today's financial headwinds back in January

Freelancers were right on the money when they took the UK’s own financial pulse in this year’s first three months, an index shows.

Despite saying they expect resilience from their own self-employed ventures, freelancers in Q1 2022 signalled that their confidence in the economy was still firmly ‘in the red.’

Asked at the time about their fiscal outlook for the country, the freelancers responded to give a confidence rating of -23.1, compared to -23.7 in Q4 2021.

‘State of the economy’

Freelance trade body IPSE, which runs the index, also found the freelancers identified the “state of the UK economy” as the most detrimental factor on their business in the near future.

But the self-employed must be soothsayers, because they expressed their fears for the economy well before the Bank of England’s key interest rate decision of May 2022.

The BoE made small upwards adjustments in January-March, but it was not until May (after the freelancer poll), when the base rate was hiked to 1% -- the highest rate for 13 years.

‘Recession fears’

Nonetheless, like other tensions in the first quarter of 2022, inflation was already simmering, according to the Association of Independent Professionals and the Self-Employed (IPSE).

“This [improved but still deeply negative confidence rating for the UK economy] can be largely attributed to the cost of the living crisis engulfing the UK as a result of rising inflation, the war in Ukraine, Brexit, and rising energy and goods prices combining to heighten fears of an economic recession,” IPSE says.

Eight in ten freelancers polled by the association in Q1 said they expected their input costs to increase over the next 12 months.

‘Concerning’

A similar chunk said the same in Q4, but the total contingent of freelancers forecasting the bottom-line to be squeezed even further increased in the first three months of this year.

IPSE called the increase ‘concerning,’ but so too is the admission by two-fifths of freelancers (39%) that they are incurring business debt.

Similarly, slightly more are commercially indebted than in Q4 2021.

‘Back into the abyss’

Perhaps with those freelancers most in mind, IPSE’s chief executive Derek Cribb says it is incumbent of the government to not let the self-employed be “pulled back into the abyss.”

And further tax changes for the freelance sector just as many sole traders are still absorbing the National Insurance Contributions increase, is the very last thing one-person outfits need.

“Self-employed workers already pay a lot of tax, and they are already paying their fair share,” said Mr Cribb, when reminded yesterday that a separate IPSE study found 6% of the public regard the self-employed as having an ‘unfair’ tax advantage.”

‘Financial constraints on freelancers’

IPSE’s CEO further told FreelanceUK: “Upping taxes would further damage one of the most innovative parts of the UK economy, and add unnecessary financial constraints on freelancers, who are already dealing with the fallout of IR35 as well as a number of other issues.”

Those issues, invariably adversely affecting their bottom line, aren’t making freelancers lose faith in themselves however.

Confidence of the IPSE respondents rose to +2.2 in the first quarter of this year, up from -11.0 in Q4, representing the first return to positive territory since the second quarter last year.

 

28th June 2022

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